UAE Real Estate / Property LawFederal Law No. (14) of 2021 On the Creation and Regulation of Owners Association

Article (1) Definitions In application of the provisions of this Law, the following words and phrases shall have the meanings assigned to each of them, unless the context requires otherwise: State : United Arab Emirates Ministry : Ministry of Energy & Infrastructure.

-- 1 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 2 Minister : :Minister of Energy & Infrastructure Competent Authority : The Local Government Agency for Registering Real Estate Transactions Owners Association : An entity consisting of Real Estate Owners in accordance with the provisions of this law, and referred to by the phrase (Owners Association) or by the word (Association) in this law General Assembly of the Association : An entity consisting of members joining the Association who own Real Estate Units in the same property, and in the event of multiple Owners of one Real Estate Unit, they shall have one representative in this Association Articles of Association : Articles of Association of Owners Association Common Parts Management System (CPMS) : A set of rules decided by the General Assembly of the Owners Association for the purpose of managing, developing, investing, maintaining and preserving the Common Parts The Board of Directors (BOD) : Owners Association BOD. Chairman of the BOD : Chairman of the Owners Association BOD Director : Director of the Owners Association Real Estate : Residential Neighbourhood or building Residential Neighbourhood : A group of Real Estate Units owned by several people with commn services and facilities Building : One independent building with accompanying and common services. It consists of a number of Real Estate Units and is owned by several people Real Estate Unit : Villas, apartments, floors, parking lots, shops, or any part of the building can be detached Person : Natural or legal person Owner : A person who owns a Real Estate Unit, whether it is one or more.

-- 2 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 3 Common Parts : All parts of the property intended for common use, whether attached or separate, or any other part whose nature requires it to be joint. Detached Parts : All built and non-built parts (dividable ) and owned by a specific person or persons for the purpose of benefiting from them, as determined by the CPMS Maintenance : The works necessary to preserve the property or the benefit, whether it is for an independent Real Estate Unit, for Common Parts, or for Detached Parts.

Article (4) Common Parts The following shall be deemed Common Parts: 1. Real Estate land in buildings; 2. The masonry structure, foundations, pillars, columns and walls in buildings, which bear the masonry or bear the roofs; 3. The shared walls separating the units, and the walls of the chimney; 4. Warehouses used as service rooms, and Waste Disposals; 5. Chimneys and ventilation shafts for bathrooms, kitchens, drains and sewers; 6. Entrances, facades, stairs, cages, corridors, pathway, basements, elevators, and firs exits; 7. The guards rooms and their places and other workers in the construction service; 8. Cooling devices and all other types of pipes, fixtures and common extensions such as lighting fixtures, water, drainage, natural gas, internet, Satellite dishes and their accessories, except inside the Real Estate Unit, and its benefit is limited to the Owner of the Real Estate Unit; 9. Sports Facilities and facilities for rest and recreation and the like; 10. Equipment and devices that provide common services and the places where they are located; 11. Courtyards, outdoor driveways, walkways, gardens, parking lots, parks, and gathering places; and 12. The last surfaces in the buildings pursuant to the provisions of the building codes.. The Ministry and the Competent Authority may issue decisions to add any other Common Parts.

Article (5) Cooperation and coordination between the Ministry and the Competent Authority The Executive Regulations shall specify the controls and procedures that:

-- 4 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 5 1. Achieve compatibility between the Ministry and the Competent Authority for the purposes of cooperation and coordination to provide facilities services, development, preservation and good investment of Real Estate covered by the provisions of this law, and all parts of these Real Estate; and 2. Determine the mechanisms for developing a guiding model for managing the Common Parts, and a guiding model for the Articles of Association of the Association.

Article (9) Common Parts Management System (CPMS) The Common Parts shall be managed pursuant to a law that shall be suitable with the type of property (Residential Neighbourhood - Building). The following provisions shall be among the provisions of this law: 1. Determine the Common Parts of the property, and each Real Estate Unit; 2. Controls for the use of the common and Detached Parts, and for making modifications thereto; 3. The management of the Common Parts by the Association BOD 4. Methods and controls for investing Common Parts and Owners Association funds; 5. Develop integrated financial governance mechanisms for the Association, to ensure (as the case may be) the following Clauses: A. Independent accounts for investment, general reserves, and operations, and continuous monitoring of these accounts; B. Timely collection of dues, with urgent and effective legal procedures; C. Auditing the disbursement of Association funds in accordance with approved accounting standards; 6. Establish controls and procedures for hiring specialised companies to do some work necessary for the property; 7. Any other issues for which a decision is issued by the Minister or stipulated by the guidelines stipulated in Article (5) of this Law.

-- 6 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 7

Article (11) Establishment of the Owners Association in Residential Neighbourhoods 1. Owners Association may be established in Residential Neighbourhoods where the number of Owners of Real Estate Units is five or more, pursuant to the following procedures: A. Invite all Owners of Real Estate Units in the Residential Neighbourhood from the entity that created it, the Ministry, the Competent Authority, or one of the Owners of Real Estate Units in the same neighbourhood, for the purpose of meeting to establish the Association. B. Five Owners agree to the creation of the Association, the selection of a Founding Committee to complete the procedures, and propose the Articles of Association of the Association for approval of its General Assembly. C. The Association shall be registered with both the Ministry and the Competent Authority, and the Ministry shall issue a decision to declare it. 2. Whoever agrees to its creation shall become a member of the Association, and the rest of the Unit Owners in the Residential Neighbourhood may join the Association whenever they express their desire to do so; 3. The Association shall have a General Assembly upon its creation that includes all the Association Members in the Residential Neighbourhood, and in the event of multiple Owners of one unit, they shall have one representative in this Association. 4. The Executive Regulation shall determine the procedures for implementing the

-- 7 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 8 provisions of this Article.

Article (12) Creation of Owners Association in Buildings 1. Owners Association may be established in Buildings where the number of Owners of Real Estate Units is five or more, pursuant to the following procedures: A. Invite all Owners of Real Estate Units in the Buildings from the entity that created it, the Ministry, the Competent Authority, or one of the Owners of Real Estate Units in the same Building, for the purpose of meeting to establish the Association. B. Owners agree to the creation of the Association, the selection of a Founding Committee to complete the procedures, and propose the Articles of Association of the Association for approval of its General Assembly. C. In the event of disagreement between the Owners on the creation of the Association, any of them may request the Plenary Court in whose district the property is located to authorise completing these procedures. The Court shall determine the Founding Committee that completes the registration procedures in the event that the Association authorises. D. The Association shall be registered with both the Ministry and the Competent Authority, and the Ministry shall issue a decision to declare it; 2. All Owners of Real Estate Units in the building shall be members in the Association Owners; 3. The Association shall have a General Assembly upon its creation that includes all the Association Members in the Residential Neighbourhood, and in the event of multiple Owners of one unit, they shall have one representative in this Association; 4. The Ministry may make an exception from the requirement for the number of Owners of Real Estate Units, set forth in Clause (1) of this Article, for the purposes of creating the Association; and 5. The Executive Regulation shall determine the procedures for implementing the provisions of this Article.

-- 8 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 9

Article (21) Functions of the General Assembly of the Owners Association The Associations General Assembly shall: 1. Approve the Articles of Association of the Association. 2. Elect BOD Members 3. Approval of the common Parts Management System (CPMS) 4. Appointment of External Auditor; 5. Report on the disbursement of financial rewards to the Chairman and BOD Members; 6. Approval of the Association estimated budget; 7. Approval of the final accounts and audited budget of the Association. 8. Discharge of the BOD and the Auditor. 9. Determining the share of each Owner in the subscriptions and maintenance expenses of the Common Parts of the buildings. 10. Any other competencies specified by the Executive Regulations, the Articles of Association of the Association, or the CPMS.

-- 11 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 12 Chapter Three Creation and Regulation of the Association

Article (22) The Association BOD 1. The members of the Owners Association General Assembly shall elect a BOD for the Association from among its members as follows:: A. A BOD of three to five members if the number of Real Estate Units does not exceed thirty Real Estate Units. B. A BOD of five to eleven members if the number of Real Estate Units does not exceed thirty Real Estate Units. 2. The BOD term shall be three years, renewable for one or more other terms. 3. Each BOD shall select its own Chairman, Vice-Chairman, and Treasurer from among its members. 4. The Ministry and the Competent Authority may appoint a representative for each of them in the BOD to attend the sessions and participate in the discussions, and the representative shall not have a counted vote in the decisions of the BOD. 5. The Ministry shall supervise the procedures for electing the Association BOD stipulated in this Article.

Article (23) Competencies of the BOD 1. The BOD shall be responsible for all that is necessary to manage the Common Parts and to invest the funds of the Association, and in particular it has the right to exercise the following competencies:: A. Propose to amend the Articles of Association of the Owners Association, and its approval by the Association General Assembly; B. Develop a draft CPMS, and approve it by the Association General Assembly; C. Implement the tasks, assignments and decisions issued by the Association General Assembly, and submit reports to it in this regard;

-- 12 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 13 D. Receive complaints and consider appeals submitted by Owners regarding the use of Common Parts and decide thereon; E. Present the final accounts and audited budgets to the General Assembly for approval; F. Appoint the Association Director; G. Direct the call for the convening of meetings of the General Assembly; H. Keep records of financial statements, audit documents, bank statements, and any other data; I. Prepare a draft budget estimate and submitting it to the General Assembly for approval; J. Communicate and coordinate with any Governmental or Non-Governmental entity within the State to carry out its tasks; K. Form committees that carry out the tasks determined by the BOD; and L. Any other competencies specified by the Executive Regulations, the Articles of Association of the Association, or the CPMS. 2. In all cases of the absence of the BOD for their dismissal or resignation, the Ministry, in coordination with the Competent Authority, shall form a temporary committee from the Association Members to exercise the BOD functions, until the General Assembly elects a new BOD within three months from the date of the dismissal or resignation.

Article (24) Preserve the Association interests 1. The BOD shall preserve the Association interests, exercise the care of a prudent person, and carry out all actions in accordance with the provisions of this law and the decisions issued for its implementation, the goals and objectives of the Association and the powers granted thereto; 2. The BOD Member may not enter into contract under the name of the Association without having the BOD written authorisation; 3. The Chairman or the BOD Member, his spouse, or any of his relatives up to the fourth degree, may not enter into any commercial transactions with the Association..

-- 13 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 14

Article (36) Disposal of Real Estate Units by Transferring their Ownership 1. Subject to the provisions of Article (8 Clause 3) of this law, the Association Member, in the event of disposal of Real Estate Units by transferring their ownership, shall notify the Association BOD in writing. 2. The transfer of Ownership in the assets of the Association or the parts designated for

-- 16 of 20 --

Federal Law No. 14 of 2021 on the Creation and Regulation of Owners Association 17 investment may not be disposed of without the approval of two-thirds of the members of the General Assembly registered in the Association. 3. In all cases of disposal of Ownership transfer, the controls and procedures stipulated in the CPMS shall be applied, along with the controls prescribed in Clauses (1 and 2) of this Article. Chapter Five Penalties